Why Momentum ETFs Are Crushing the Market

Momentum ETFs are crushing the market as investors lean into the momentum effect, which research has linked to periods of outperformance. The article explains factor investing by characteristics such as value, quality, momentum, size, and minimum volatility, noting that factor returns are typically cyclical and hard to time. It argues that momentum has outpaced the broader market over the long term and cites the Jegadeesh and Titman (1993) study documenting the tendency of “winners” to outperform “losers.” This year’s momentum cycle is described as being driven primarily by earnings growth, particularly as investors continue to favor high-performing stocks in semiconductors and memory. It also warns that momentum strategies can reverse sharply after broader market sell-offs. The article points to ETFs including iShares MSCI USA Momentum Factor (MTUM), Invesco S&P 500 Momentum (SPMO), and Invesco DWA Technology Momentum (PTF), naming top holdings such as Micron (MU), NVIDIA (NVDA), Intel (INTC), Sandisk (SNDK), and Broadcom (AVGO).